Volume 25, Number 4 (Fall) 1990
McElroy, Marjorie B. 1990. "The Empirical Content of Nash-Bargained Household Behavior." Journal of Human Resources 25(4):559-583.
In households whose allocation decisions can be represented as Nash-bargained household decisions, extrahousehold environmental parameters (EEPs) serve as pure shifters of the threat points. The comparative statics of changes in demands due to changes in these EEPs are given. These are incorporated into a comprehensive statement of the empirical content of Nash-bargained household behavior, including a Nash generalization of Barten's (1966) fundamental matrix equation of the theory of consumer demand. Estimation and data requirements are discussed along with nested testing of the following structure: the neoclassical model is nested in the Nash-bargained model which, in turn, is nested in an unrestricted model of household demands. Emphasized throughout is the enriched menu of explanatory variables for demand analysis provided by the Nash model, as well as the model's ability to jointly analyze (i) household formation and (ii) intrahousehold allocation decisions.
The author is professor of Economics at Duke University, Durham, North Carolina. This research was supported by the National Science Foundation (SES-86-18403). The author gratefully acknowledges the many useful comments by participants in the Conference on the Bargaining Approach to Decision Making of Families at Yale University, April 1989, and those of participants of the Duke Labor and Applied Economics Workshop. All errors are the responsibility of the author.
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